New Delhi: Opposing any hike in FDI cap in multi-brand retail, apex traders' body CAIT Tuesday said such a move will not only affect interest of small traders but would also have a negative impact on the economy.

A government committee has recommended increasing FDI cap in multi-brand retail trading to 74 percent from 51 percent at present. Prime Minister Manmohan Singh is scheduled to discuss the proposal to hike foreign investment caps in sectors like telecom, retail and defence with his senior Cabinet colleagues later in the day.

"Increasing the FDI limit in multi-brand retail will ruin domestic trade and will also have a huge negative impact on the national economy," Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal said.

"If any such step will be taken by the government, traders will hold nationwide agitation to protest against it. After all, it is a question of survival of our people and we will not rest till this policy is reversed," he added. CAIT claimed this recommendation was not based on ground realities and trader’s community has not been consulted on the issue.

The Confederation urged the government to draft a national trade policy for retail sector. "Instead of hiking the FDI limit in multi-brand retail, the government should draw a national trade policy for the sector which would help in upgrading the existing format of retail and would prepare traders to meet global challenges," Khandelwal said.

"More than five crore traders are involved in retail sector and they are competent enough to rejuvenate the economy. Thus, there is absolutely no need to further open up the sector," he added.

The government is keen on increasing FDI ceilings to attract more overseas investments and finance the widening current account deficit (CAD). CAD reached 4.8 percent of the GDP in 2012-13 as against the RBI's comfort level of 2.5 percent.

High CAD puts pressure on the domestic currency and can expose the economy to balance of payments problems.